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ASIA RESIDUAL FUELS: Key market indicators for June 27-July 1

Marine fuel oil 0.5%S supply in Singapore was likely to remain tight over June 27-July 1 amid a high gasoil crack spread, market sources said.

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In contrast, supply-demand fundamentals in the high sulfur fuel oil market were expected to remain weak due to increasing cargo inflows to Asia, even though demand from the Middle East was rising to meet summer electricity demand, the sources said.

Crude oil futures kicked off the week higher in mid-morning trade in Asia June 27, with August ICE Brent at $113.78/b at 11 am Singapore time (0300 GMT), up from $110.60/b at the Asian market close June 24.

Marine fuel 0.5%S

** The cash differential for Singapore marine fuel 0.5%S cargoes against Mean of Platts Singapore swap values hit a fresh record high of $78.09/mt June 24, up 60 cents/mt from June 23 and surpassing the last record high set on June 2 at $77.81/mt, S&P Global Commodity Insights data showed.

** Market sources said there was not enough marine fuel oil in the market to meet demand amid higher gasoil values, with blending components being taken by the gasoil market and little left for the marine fuel 0.5%S grade. Skyrocketing gasoil values were supporting marine fuel 0.5%S prices as about 70% of marine fuel 0.5% consists of middle distillates, market sources said.

** Nonetheless, the downstream Singapore low sulfur marine fuel market was unlikely to see further significant upside from prevailing lofty valuations as trading activity picks up pace for July deliveries.

** The premium for Singapore-delivered marine fuel 0.5%S bunker, which had touched an all-time high of $108.58/mt at the Asian close June 22, inched lower to close the week at $103.51/mt June 24 as trading activity began gathering pace for July deliveries, for which more sellers were seen competitively pricing their offers.

** While supply of finished-grade material was likely to ease going into H2 July, prices in the end-user low sulfur bunker fuel market could well hinge on the direction taken by the upstream Singapore marine fuel 0.5% cargo market, traders said.

** In Fujairah, the premium for delivered marine fuel 0.5%S bunker was also likely to taper off from the prevailing near record high levels on expectations of supply tightness easing.

** Supply of finished grade material at the Middle Eastern port was expected to increase as a Fujairah-based producers' refining units come back online after maintenance earlier in the month, traders said.

* In China, Zhoushan's suppliers anticipate strong delivered marine fuel 0.5%S bunker premiums would soften in the week amid expectations of rising inventory levels, while sellers were likely to offer more aggressively owing to largely lackluster demand throughout June.

** In South Korea, buyers of delivered marine fuel 0.5%S were expected to face fewer offers for end June as local suppliers were reportedly offering competitively for early July deliveries amid limited stocks for balance June parcels, market sources said.

** In Japan, spot LSFO bunker demand for early July deliveries was expected to strengthen after limited availability for prompt requirements during the final trading week for June prompted buyers to inquire for July bunker deliveries in advance, traders said.

High sulfur marine fuel

** Supply in Singapore's high sulfur bunker fuel market was likely to remain ample June 27-July 1 due to increasing supply into Asia, sources said.

** Kuwait Petroleum Corp. has started buying HSFO to meet summer electricity demand, but higher supply continues to weigh on the market, fuel oil traders said.

** The downstream Singapore high sulfur bunker fuel market was likely to remain subdued in the week on expectations of ample supply amid steady demand, traders said.

** The premium for Singapore-delivered 380 CST bunker over Singapore 380 CST HSFO cargo was likely to remain rangebound in the mid-teens amid a lackluster upstream Singapore 380 CST HSFO cargo market, which has been trading at a discount.

** In China, healthy inflows of HSFO replenishment stocks were expected to buoy inventories at Shanghai and Zhoushan in early July, while moderate demand was also likely to cap delivered bunker premiums, traders said.

** In Japan, traders expect HSFO bunker demand to be steady as buyers have reportedly sought more requirements for July deliveries in late June, while barge availability and stockpiles remain healthy.

** In Hong Kong, robust demand for HSFO bunkers was expected to continue in the week while inventories remain ample, with local suppliers recently reporting an uptick in prompt inquiries for late June requirements.